Electric vehicle stocks are trending lower, and Tesla (NASDAQ:TSLA) is no exception. After performing well during the final two months of 2023, TSLA stock thus far this year has declined by around 12%.
While shares in the company’s smaller, more fledgling competitors have experienced even sharper declines, I can see why you may think this is concerning.
Based on this latest price action, it’s clear that the market is concerned that issues like slowing growth, high competition, and falling margins are not issues on the verge of clearing up, not even for the global leader in EVs.
Yet while this latest weakness may persist in the near-term, keep something in mind. The bull case for TSLA is not unraveling. I wouldn’t count on shares doubling in price again (as happened in 2023), but there may be a path for TSLA to finish this year in the green.
TSLA Stock and the Latest Sentiment Shift
Other “Magnificent Seven” stocks, after an initial rough start to the year, have since resumed trending higher. With this, it may appear strange that Tesla stock has failed to rebound, and has in fact kept on declining.
However, look at the latest news directly related to TSLA stock. It’s not a mystery why this is happening. It makes sense that sentiment has been shifting back towards bearish. As I recently pointed out, a “China recall” affected the stock but isn’t as bad as it sounds.
This month, the company also announced that it was revising reported driving ranges for its vehicles, in light of more stringent testing rules from U.S. regulators. Just last week, Tesla announced a production halt at its German gigafactory. This temporary shutdown is because of the impact of recent conflict in the Red Sea on supply chains.
As hinted above, souring sentiment about the EV sector is dampening bullish sentiment for TSLA as well. Even as some argue that talk of an “EV slowdown” is an overreaction, investors remain concerned that a slowdown is happening, and it will impact Tesla’s results in the coming quarters.
How Tesla Could Bounce Back (Eventually)
Pessimism for TSLA stock may be rising, but there are plenty of die-hard Tesla fans that may see an upcoming event as something that could get shares out of their latest slump. That would be Tesla’s next earnings release, scheduled to happen post-market on Jan. 24.
If you can recall, it was Tesla’s Q4 2022 earnings release last January that helped the stock get out of its late 2022/early 2023, en route to substantially higher prices. Record earnings and upbeat guidance outweighed concerns about the impact of aggressive vehicle price cuts on margins and profitability.
While not for certain, a similar scenario could play out following the Q4 2023 earnings release. The EV maker did once again report strong production and delivery numbers for Q4 and the full year 2023. Updates to guidance suggesting something like a growth resurgence may help to outweigh margin-related worries once again.
Better yet, even if there’s no post-earnings rally for TSLA later this month, other potential catalysts could drive a rebound later this year. For example, like I pointed out a few weeks back, an improving macro picture in China and the U.S., or maybe even the unveiling of a low-priced EV.
The Bottom Line: Proceed as Normal
According to the skeptics, Tesla is still overvalued and overhyped. In their view, growth and margins will keep falling. As the EV powerhouse becomes more like its incumbent automaker competition, the stock will experience a severe de-rating.
Yet while bearish on shares are free to maintain such a view, I wouldn’t write off TSLA’s 2024 prospects. Much remains in play to send shares back to full charge. A solid price performance this year doesn’t hinge on one particular event.
A strong Q4 earnings release, improving EV demand trends, and new vehicle launches are just some of many possible catalysts out there.
As such, consider my view on Tesla unchanged. If you’ve yet to buy TSLA stock, consider recent or continued weakness a good time to do so. If you currently hold a position, there’s no need to hit the brakes.
TSLA stock earns a B rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
